Some of the Best Home Mortgage Refinance Options

Mortgage rates are constantly changing. Sometimes for better, and sometimes for worse. There are also different terms that mortgages have, some better than others. That is why it may be a benefit to you as a homeowner to reconsider your refinancing options. If you are interested in refinancing your mortgage, you can use this article as a guide to get you going in the right direction. There are different types of refinances you should consider, especially given your unique situation.

What is a Mortgage Refinance?

A mortgage refinance is when you pay off an existing loan and replace it with a new loan. This is similar to when you refinance your auto loan.

Understanding Different Types of Mortgage Refinancing

Many people may not realize how many refinancing options are available for mortgages. There are numerous refinancing options out there but three in particular that we want to highlight includes:

  • Rate-and-Term Refinance Loans
  • Cash-Out Refinance Loans
  • Cash-In Refinance Loans

Rate-and-Term Refinance Loans

This is probably the most popular refinance option that borrowers get. In this refinance setup, you will take the original mortgage balance and just borrow at updated rates and terms.  People typically improve their loan terms by switching from an adjustable rate mortgage (ARM) to a fixed rate mortgage instead. They may even be able to get a lower interest rate as well!

Cash-Out Refinance Loans

Cash-out refinances are a type of refinancing where a homeowner replaces their existing mortgage with a new one for an amount greater than their current outstanding loan balance. The difference between the new loan and the original loan balance is then provided to the homeowner as a lump sum of cash. This is made possible thanks to the amount of equity a homeowner has!

Cash-In Refinance Loans

A cash-in refinance is the opposite of a cash-out refinance. In this scenario, a homeowner pays down a significant portion of their existing mortgage balance during the refinance process, thereby reducing the total amount of the new loan. The homeowner essentially brings cash to the closing table, which allows them to take advantage of lower interest rates, reduce their loan-to-value ratio, or even shorten the term of their mortgage.

Is it a Good Time to Refinance?

If you want to find out whether or not it is a good time to refinance, you need to take a look at your current situation, motivation to refinance, and market conditions. Oftentimes, people like to refinance because they want to reap the benefits of improved mortgage rates. These improved rates can help you get a lower monthly payment, better flexibility terms, reduced repayment term conditions, debt consolidation opportunities, and more!

How Much Would You be Able to Save with a Refinance?

There is no predetermined amount that you could save when you refinance your mortgage. You need to consider the current mortgage rates and your motivation for refinancing. If your current mortgage rate is the same as what’s on the market and you just want to shorten your term then you could face no savings. However, if the current rates are less than on your mortgage then you could possibly save a lot! There are free tools online that can help you. You can use a free mortgage calculator to see what you may be able to save.

What is the Minimum Credit Score Required to Refinance?

There is no set minimum credit score that you need in order to qualify across the board. Every lender is different so they will need to disclose what their qualifying minimum score is.

Are There Any Costs Associated with Refinancing?

Your lenders vary. That is why they will have different fees associated with their mortgage refinance process. Some fees that you may encounter are:

  • Credit report fees
  • Escrow fees
  • Notary fees
  • Recording fees
  • Third party fees
  • An appraisal fee
  • Processing fees
  • Underwriting fees
  • Lender fees

There are plenty of expenses that you could encounter when refinancing your mortgage. Some lenders may charge more fees than others. That is why it is important to compare your options so you can find some of the best mortgage refinance lenders. You should expect to spend between 2% and 6% of the value of your home.

What Documentation Do You Need for a Mortgage Refinance?

Exact documentation requirements will vary by lender. However there are general documents that typically come in handy during the refinance process. You will need to be able to verify your financial information. You can usually do this with pay stubs and/or tax documentation like a W-2. You will also likely need some bank statement information to cover a set time frame. A good rule of thumb is to document the past two months. Be sure to bring identification information as well like your driver’s license, birth certificate, etc. Since this is a mortgage refinance, you will need your original mortgage information. Examples of this documentation would be a homeowners insurance declarations page, mortgage statements, etc.

How Long Will a Mortgage Refinance Take? 

The amount of time that a mortgage refinance will take varies by individual. However, the refinance process usually takes up to 45 days to complete. Factors like the complexity of the loan, your paperwork submission, and more could impact the time it takes.

Which Bank is Best for Refinancing?

The best banking option for refinancing is entirely up to you. You need to look at your credit score, loan amount required, and other eligibility factors when making a decision. The bank that best fits your needs will be the one you should choose. Keep in mind the reason you are looking to refinance when considering your lending options!

Bottom Line

You may be able to see a lot of benefits if you choose to refinance your home. However, every person’s situation is unique. That is why you will want to crunch the numbers yourself as well as talk to a professional. They can help you better understand if refinancing your home is a good path for you at this point in time. There are different types of refinances out there but some you may come across include:

  • Rate-and-Term Refinance Loans
  • Cash-Out Refinance Loans
  • Cash-In Refinance Loans
  • Which is also why it’s so important to have a clear understanding of these options. There are so many pieces that can make a big difference, so make sure you are well informed!
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